4. Fair Value Measurement of Assets and Liabilities

The Company’s fair value measurements relate to its cash equivalents, marketable debt securities, and marketable equity securities, which are classified pursuant to authoritative guidance for fair value measurements. The Company places its cash equivalents and marketable debt securities in instruments that meet credit quality standards, as specified in its investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument.

The Company’s financial instruments consist principally of cash and cash equivalents, and short-term and long-term marketable debt securities. The Company’s cash and cash equivalents consist of its investments in money market securities and treasury bills. The Company’s marketable debt securities consist primarily of government agency securities, municipal bonds, time deposits and investment-grade corporate bonds.

Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree to which the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

Level 1: Pricing inputs are based on quoted market prices for identical assets or liabilities in active markets (e.g., NYSE). Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Pricing inputs include benchmark yields, trade data, reported trades and broker dealer quotes, two-sided markets and industry & economic events, yield to maturity, Municipal Securities Rule Making Board reported trades and vendor trading platform data. Level 2 includes those financial instruments that are valued using various pricing services and broker pricing information including Electronic Communication Networks and broker feeds.

Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company’s own assumptions.

At June 30, 2014, the Company did not have any securities in the Level 3 category. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of June 30, 2014 (in thousands):


Description	June 30, 2014		Level 1		Level 2
Assets:
Cash equivalents
US Treasury securities	$	742	$	0	$	742

Total cash equivalents		742		0		742

Short-term marketable securities:
Available-for-sale:
Government agency securities		1,150		0		1,150
Municipal bonds		976		0		976
Certificates of deposit		3,220		0		3,220
Corporate debentures / bonds		8,157		0		8,157

Total short-term marketable securities		13,503		0		13,503

Total financial assets	$	14,245	$	0	$	14,245


Description	December 31, 2013		Level 1		Level 2
Assets:
Cash equivalents
US Treasury securities	$	487	$	0	$	487

Total cash equivalents		487		0		487

Short-term marketable securities:
Available-for-sale:
Government agency securities		2,351		0		2,351
Municipal bonds		2,829		0		2,829
Certificates of deposit		3,360		0		3,360
Corporate debentures / bonds		10,638		0		10,638

Total short-term marketable securities		19,178		0		19,178

Long-term marketable securities:
Available-for-sale:
Certificates of deposit		1,300		0		1,300
Corporate debentures / bonds		2,143		0		2,143

Total long-term marketable securities		3,443		0		3,443

Total financial assets	$	23,108	$	0	$	23,108

See Note 2 for discussion of restricted cash and restricted marketable securities related to the Company’s credit facility.